Thursday, November 22, 2012

Daily Finance: The Yankees Score Big with a $1.5 Billion TV Deal

According to Bloomberg, the Yankees are now signed with the YES Network
through 2042 -- an incredibly long 30-year television contract. The club
got $85 million in fees from YES for the current year, and the sale
includes a 5 percent increase annually in that rate for 30 years.

That means that by 2042, the club will be making $367 million per year
just to have their games shown on TV. At today's salaries for ball
players, that's enough to pay the top 16 contracts in baseball -- with
enough money left to fill out the roster.

I have no idea what's going on with our host now, and don't feel like spending my Thanksgiving figuring it out so I'm bringing this version of the site back temporarily.

Back to this article, it seems to me that any time you commit to a 30 year contract you may end up regretting it by the end of it. And I don't want to even get into the whole Rupert Murdoch possibily owning the Yankees eventually thing.

10 comments:

If you assume that the Yankees want to stay at the salary cap, the cap needs to increase by a bit more than 2% per year in order for it to match the amount of money the Yankees will get from this TV deal in 2042.

I would guess there is a chance that happens, although it's more likely the union goes on strike first.

Ouch. Not the end of the world but certainly not good news from a fan perspective.

1) Yankees team ownership has less of an incentive to pay for a good team that brings in advertising revenue to YES as the Steinbrenner's reduce by a quarter their size of YES ownership (from 34% to 25%).

As others have said here (can't quote with the website problems), Fox *could* increase the size of the YES pot. But mostly that will be from sources other than the Yankees. The big plus would have been if Fox could extend TV coverage outside the NY area market in a way that bypasses the central MLB and send the increased revenue straight to YES. But, no doubt, MLB won't allow that (presubably the Braves/TBS was a grandfathered arrangement). Fox could help with advertising the games in the NY market but I don't think that will change much by itself.

2) The NY baseball fan market is pretty saturated, So if Fox wants to change the numbers and demographics of who watches the games they be tempted to make the game broadcasts more "entertainement" oriented and a bit less pleasing to the core fans.

3) Hard to read what this means for the Steibrenners' future. Overall, this is a partial cashing out early shifting risk/opportunity to Fox. You could do that if your were open to selling the team down the road; or if you wanted to diversify into a safer long term ownership. Either way it points to a less adventurous ownership.

As Paul notes, this likely is not a huge deal, but whatever the Steinbrenner's motives are here, they are almost certainly not the best interests of the Yankees baseball team.

And here's the thing that irks me. While the situations that led to the decisions are obviously different, this is very similar to the contract that MLB voided between McCourt and Fox in Los Angeles. The argument there was that McCourt was doing the deal not because it was in the best interest of the Dodgers, but because it put him in a position to be able to continue to own the Dodgers.

So there, a totally normal capitalistic move was banned by Major League Baseball because an owner was putting his interests over the team.

And yes, McCourt was in a much worse position than the Steinbrenners, but the basic principle was the same. A much better comparison, though, is how Wilpon is allowed to mortgage the Mets' future so that he can continue as the Mets' owner. Wilpon was doing moves very similar to McCourt (and with similar motivations) and Major League baseball approved everything Wilpon did, while forced McCourt to sell.

Like Wilpon, the Steinbrenners are very friendly with the powers that be, while McCourt was not.

Essentially, I think this is a lot of the same cronyism that led to Jeffrey Loria's current position.

It likely won't have a major impact on the Yankees because they are not financially in trouble, but whatever impact it will have, at best it is a net neutral for the Yankees as a club. And I don't like how Major League Baseball haphazardly applies laissez-faire tactics based on whether the owner is a pal of theirs or not.